FULL RECOMMENDATION
SECTION 83, EMPLOYMENT EQUALITY ACT, 1998 PARTIES : COILLTE TEORANTA (REPRESENTED BY DOCKRELL FARRELL SOLICITORS) - AND - PETER O'DWYER (REPRESENTED BY IRISH MUNICIPAL, PUBLIC AND CIVIL TRADE UNION) DIVISION : Chairman: Ms Jenkinson Employer Member: Mr Grier Worker Member: Mr Nash |
SUBJECT:
1. Appeal under Section 83 of the Employment Equality Act, 1998 - DEC-E2005-039
BACKGROUND:
2. The worker appealed his case to the Labour Court on the 14th of September, 2005, in accordance with Section 83 of the Employment Equality Act, 1998. A Labour Court hearing took place on the 10th of January, 2006. The following is the Court's determination:-
DETERMINATION:
This is an appeal by both Mr. Peter O'Dwyer (The Complainant) who was represented by IMPACT and Coillte Teoranta (The Respondent) against the decision of an Equality Officer in a claim alleging discrimination on the age ground brought by the Complainant. He claimed that he was offered a less favourable Early Retirement/ Voluntary Parting Scheme (ER/VPS) package than a younger colleague and that this amounted to discrimination on grounds of age, in terms of Section 6(2)(f) of the Employment Equality Act, 1998 (The Act), and in contravention of Section 8 of that Act.The claim pursed by the Complainant related to the following: -
The Respondent introduced an ER/VP scheme to be availed of between 15th January, 2002, and 31st March, 2002. This scheme was available to all employees, but had limited options available for those over 60 years of age.
Those employees under 60 years were entitled to a severance gratuity up to a maximum of one and half years salary, while those over 60 years were entitled to a maximum of six months salary.
The Complainant was, at the material time, 60 years of age.
Having investigated the complaint the Equality Officer found the provision in the ER/VPS whereby the complainant received a smaller severance gratuity than the comparator was discriminatory on the grounds of age. However, by virtue of Section 34 (3) of the Act, the Equality Officer found that the discrimination was not unlawful as the Respondent was capable of showing that significantly increased costs would result if the discrimination were not permitted.
Section 34 (3) of the Act, states;
- (3) Nothing in this Part or Part II shall make unlawful discrimination on the age ground or the disability ground in circumstances where it is shown that there is clear actuarial or other evidence that significantly increased costs would result if the discrimination were not permitted in those circumstances.â€
Having so found, the Equality Officer went on to make a decision that the Respondent did not discriminate against the claimant on grounds of his age contrary to terms of the Employment Equality Act, 1998.
Both parties appealed to the Court against that decision. The Union, on behalf of the Complainant, disputed the Equality Officer's conclusion that the cost involved in paying the severance gratuity come within the scope of "significantly increased costs"as provided for under Section 34 (3).
The Respondent's appeal centred around two issues, namely
(i) a "severance gratuity" does not come within the definition of "remuneration" for the purposes of the Employment Equality Act, 1998, and
(ii) the ER/VP scheme was not an age related scheme but a service related scheme.
At the Court hearing on 10th January, 2006, Counsel for the Respondent accepted that severance gratuity comes within the definition of "remuneration" .
Therefore, the Court does not intend to address this aspect of the Respondent's appeal any further.
- The issues for consideration by the Court are:
1. is the provision in the scheme discriminatory, whereby the age limit for employees to receive a severance gratuity of one and a ½ years' salary was set at 60 years whereas those above the age of 60 received only six months' salary,
2. is the applicable law the Act of 1998 or the Directive 2000/78 or both,
3. is the Directive directly effective against Coillte as an emanation of the State,
4. in the event that the Act of 1998 is applicable, could the respondents avail of the provisions of Section 34 which allowed certain exceptions in relation to age.
Background:
Discrimination on the grounds of age is clearly defined in Section 6 of the Act, which states:
6. - (1) For the purposes of this Act, discrimination shall be taken to occur where, on any of the grounds in subsection (2) (in this Act referred to as "the discriminatory grounds"), one person is treated less favourably than another is, has been or would be treated.
(2) As between any 2 persons, the discriminatory grounds (and the descriptions of those grounds for the purposes of this Act) are - ...............
- (f) that they are of different ages.
In summary, the background to the dispute is that in January, 2002, the Respondent introduced a scheme to address the issue of organisational efficiency by effecting a reduction in overall staffing, thereby reducing costs in line with competitors. This scheme - "Coillte Alternatives Packages" - followed on from a number of similar type schemes in previous (and in the following) years and was available to non-industrial employees (mostly compromising of former established civil servants). Since 1988 over 1,000 staff members have availed of the different packages and left the employment of the Company.
The Complainant's Case
For the following reasons, the Complainant believes that he was discriminated against on the basis of his age: -
The Complainant submitted that while the pension and lump sum calculations under the ER/VP schemes were applied in the same manner for those under 60 years and those over 60 years, there was a significant difference in the application of the severance gratuity and that this difference was wholly attributable to age. Under the terms of the schemes, the maximum gratuity available to those aged 60 or over is six months' pay where as the maximum to those aged under 60 years is one and one half year's salary.
Details of the application of the scheme for the Complainant and for a Comparator were supplied to the Court:-
Complainant Comparator
Age at retirement 60 years 59 years
Salary €44,569 €46,352
Service 41.2 years 40.7 years
Severance €23,062 €69,628
Therefore, the Complainant simply stated that he was at a loss of €43,792vis a visthe Comparator and that this difference is based on their respective ages, and this constituted age discrimination on the part of Respondent.
The Complainant contended that the Equality Officer's interpretation of the costs as being "significantly increased costs" should apply only in exceptional circumstances, on a very restrictive basis. It was submitted that even if all the employees over 60 who availed of the scheme had been discriminated against, the total cost of €1.07 million (cost for the 26 employees over 60 years who availed of the scheme), amounting to 1.9% of staff costs; .6% of turnover; .09% of assets or 4% of annual profits for 2003, was not significant.
The Respondent's case
The Respondent stated that the Early Retirement/Voluntary Parting Schemes were not discriminatory as they were not related to age but were related to service. When viewed in their totality, the difference between the schemes was minimal. The main reason for the selection of a different severance gratuity for those under 60 was that they could not receive their pension until they reached age 60 and, therefore, the severance gratuity was increased for those under 60, to make the overall package more attractive to them.
Mr. B the ex-Human Resources Manager for the Company explained that there were two options available under the schemes: -
Option 1 Early Retirement
Pension and Lump Sum (plus up to 7 Added Years)
Severance Payment
Offer of Contract Work for up to 4 years
Option 2 Voluntary Parting
Deferred Pension and Lump Sum (paid at 60th Birthday)
Severance Payment (immediate payment)
Offer of Contract Work for up to 4 years
He explained that in order to achieve its goal, it was important to attract as many employees to retire as possible. Having considered many other options, it was decided to achieve this aim in the following way: -
TheEarly Retirementoption was available to all employees; however, theVoluntary Partingoption was only available to those who could not avail of a retirement pension (until they reached 60 years of age). Therefore, the scheme was designed to make it attractive to those under 60 years - as well as those over 60 years.
The contract of employment for non-industrial employees provided for a minimum retirement age of 60 and a compulsory retirement age of 65. Full retirement pension benefits were available to those who had forty years service at age 60 years. Those who did not have forty years could avail of up to seven added years. The entitlement to the severance gratuity of up to six months salary was conditional on whether the employee availed of the added years option or not. The gratuity payment would then be reduced pro rata by the number of added weeks availed of.
- In order to compensate for the deferral of pension benefits for those under 60 years of age, the Respondent decided to incentivise the scheme by providing a severance gratuity of up to one and half years salary. Whereas those over 60 years could avail of an immediate pension on opting for the scheme and did not have to endure a similar deferral of pension.
With the addition of the option to avail of the four-year contact, which allowed people to work for up to 60 days per annum, there would be little difference in earnings compared to their pre- retirement earnings.
The Complainant opted to retire under the scheme with effect from 30th June 2002. He was 60 years of age at the time and had 41.2 years service. He received a severance payment of €23,062 and contract pay over four years of €65,200 and a retirement pension benefit of €22,285 plus lump sum of €68,638.
The Schemes provide for employees under the age of 60 who choose the ER/VP option to receive a severance gratuity calculated on the basis of three weeks' pay per year of actual service (to a maximum of one and half years' pay). Employees over the age of 60 may only receive the ER option, the severance gratuity element of which is calculated on the basis of three weeks' pay per year of potential service to age 65 (to a maximum of six months' pay).
The Respondent argued that the scheme is designed to reflect the difference in income forgone by the applicants. When comparisons are made for the Complainant and the Comparator under the provisions of the ER/VP schemes the amounts payable were as follows: -
| Complainant | Comparator | |
| ER Option | ER/VP Option | |
| Age at exit | 60 | 59 |
| Service | 41.2 years | 40.7 years |
| Salary at exit | €44,569 | €46,352 |
| Pension Payments (at 60 years for comparator) | €90,923 | €106,275 |
| Severance gratuity | €23,062 | €69,528 |
| Contract potential value over 4 years | €61,614 | €61,614 |
 | | |
| Cost of ER/VP schemes | €113,985 | €175,803 |
| Potential Cost of availing of all Schemes | €175,599 | €237,417 |
| | |
| Salary Foregone | €181,840 | €237,771 |
| | |
| Difference (salary forgone v availing of all schemes) | €6,241 | €354 |
The Respondent stated that it would have cost more to retire the Complainant if it had to pay him the Voluntary Parting severance gratuity payment of one and half years salary than it would to continue him in employment until his compulsory retirement at age 65 years. Whereas, for those under 60 years of age, the income foregone would have been more than the cost of the ER/VP schemes.
The Respondent indicated to the Court that the exercise showed that the excess of the capitalised value of salary payments foregone as a result of leaving service over payments receivable is €354 in the case of the Comparator and €6242 in the case of the Complainant. It makes the point that the payment of an additional sum of €44,569 to the claimant would result in compensation for loss of office, which would substantially exceed the value of the income foregone. Furthermore, it was circumstances other than age, which prevented the Complainant from reaping greater value from the early retirement arrangement, these relate to his length of service - by virtue of his number of years completed service he could not benefit from additional years of pensionable service.
Mr. B explained that it would have undermined the logic of the scheme if the costs of the scheme were such that they exceeded the cost of salary forgone. The intent of the scheme was to make it attractive to employees and to reduce costs. To apply the same "severance gratuity" terms to all, regardless of their entitlement to avail of an immediate early retirement benefit, would have cost in the region of €1.07 million, over 60% of the total cost of the schemes to the Company. Such additional costs would take a long time to recoup. He pointed out that the scheme would not have got Ministerial approval if the Voluntary Parting severance gratuity of up to one and half time salary had applied to all.
Mr. Q, an actuary, acting on behalf of the Company gave evidence on the comparison of benefits from the schemes with income forgone for both the Complainant and the Comparator. He stated that the correct basis for comparison was the actual salary foregone by each of the parties assuming that they both worked until age 65. He outlined for the Court the difference between the payments made to the Complainant and his potential income from the Company had his employment not been terminated. He showed that the difference was €6,241 based on the payment of a severance gratuity of €23,062. However if the Complainant received his claimed Voluntary Parting severance gratuity of €43,792 it would have meant that he would have received more in payments as a result of leaving than he could reasonably have expected to receive by way of salary as an employee assuming service up to age 65 and would have benefited to a far greater extent than the Comparator.
In the case of the Comparator, who received a severance gratuity of €69,528, the excess of the capitalised value of salary payments foregone as a result of leaving service over payments under the scheme was €354. Therefore, in actual fact, the total value of the package relative to potential income foregone for both the Complainant and the Comparator was broadly comparable compensation. Also in the Complainant's case, due to his length of service - which exceeded 40 years - he could not avail of the added years option. Therefore it was his length of service, which prevented him from reaping greater value for the early retirement arrangement. A corresponding member with 35 years' service could receive additional pension benefits worth in the region of 117% of salary. Two employees over age 60 did in fact avail of the additional years of service option.
When questioned by the Court as to his remit before the Court, Mr. Q made it clear that his sole function was to assess the relative difference in benefits foregone as between the Complainant and the Respondent. He was not required to give evidence in relation to the assertion that "significantly increased costs" would occur if the complainant's claim was allowed.
The Respondent's Finance Director gave evidence confirming the Company's financial circumstances, and these figures did not vary with those quoted by the Union (see above). He added that the Company had debts of almost €120 million and borrowing power up to €101 million with temporary sanction to borrow up to an additional €23 million, i.e. flexibility of around €3 million. He stated that this meant that the Company had very little headroom in terms of cash and was not in a position to realise further cash. He explained that the difference between this ER/VP scheme and previous ones was that the Company was now close to their borrowing limit.
The Respondent stated that in the event that there was discrimination, the provisions of Section 34 (7) of the Act and the provisions of the Directive both allowed it to set up the scheme in the manner specified. In addition the provisions of Section 34 (3) which
allowed discrimination where "significantly increased costs" would result if that discrimination were not permitted were also applicable.
Conclusions of the Court
The Complainant contends that he was discriminated against on the grounds of his age in being treated less favourably than the Comparator who was of a different age, in breach of section 6(2)(f) and contrary to Section 8 of the Act. The Court has examined all of the evidence adduced and the submissions of the parties.
The Court must proceed to consider if the Complainant has established a prima facie case of discrimination on the age ground.
The test for determining if a complainant has established a prima facie case of discrimination is contained in the Determination of this Court in the well known case ofMitchell v Southern Health Board[2001] E.L.R. 201, wherein the Court said:
- "It is necessary, however, to consider the extent of the evidential burden which a claimant must discharge before a prima facie case of discrimination on grounds of sex can be made out. The first requirement of Article 4 of the Directive is that the claimant must 'establish facts' from which it may be presumed that the principle of equal treatment has not been applied to them. This indicates that a claimant must prove, on the balance of probabilities, the primary facts on which they rely in seeking to raise a presumption of unlawful discrimination.
It is only if these primary facts are established to the satisfaction of the Court, and they are regarded by the Court as being of sufficient significance to raise a presumption of discrimination, that the onus shifts to the respondent to prove that there was no infringement of the principle of equal treatment."
Section 6of the Act provides that discrimination shall be taken to occur where one person is treated less favourably than another is, has been or would be treated, on one of the discriminatory grounds, which include age. The Act also provides atPart IV:
- (1) For the purpose of this Part, 'C'and 'D'represent 2 persons who differ as follows:
- (e) in relation to the age ground, C and D are of
different ages ...
- (e) in relation to the age ground, C and D are of
While the severance package is limited to 27 weeks for those with over 40 years' service, it is notable that those under 60 years (as in the Comparator) with 40 or more years service can avail of the up to one and a half years salary. This fact signifies that the options are directly related to age and not just service. This is the case even though neither option specifies an age restriction, however, Option ii is only available to those whose pension and lump sum are deferred until they reach 60 years of age.
However, the difference in value of the severance gratuity, which is substantial, is attributable to the fact that those over 60 cannot avail of the Voluntary Parting Scheme. The exercise demonstrates that the Complainant received a severance gratuity of €23,062, while the Comparator received a severance gratuity worth €69,528. The Court is satisfied that such disparity in severance gratuity is based exclusively on the ages of the employees.
Accordingly, the Court finds as a fact that the setting of different ages in respect of the severance gratuity constitutes prima facie evidence of discrimination on the grounds of age. It must be said that the Respondent has not to any great extent, attempted to claim that the treatment was not discriminatory, rather it has sought to justify the treatment in terms of the exceptions granted under Section 34 of the Act. Further it has stated that the Court should look at the schemes in terms of their overall effect, particularly in terms of income foregone by both the Complainant and the Comparator assuming that both reached normal retiring age and availed of all elements of the schemes open to them.
In defence of the impugned act of discrimination Counsel for the Respondent relied on Section 34 (3) of the Act, and presented financial information to substantiate its position that significantly increased costs would result if extra costs associated with the payment of additional severance gratuities to all other relevant employees, which it claimed would amount to €1,073,247. It stated that the impact of a large additional cost factor would be significant indeed, both in the context for the viability of the scheme, as a vehicle for reducing overheads in line with competitors and in light of the respondent's present financial situation.
However, the difference in value of the severance gratuity, which is substantial, is attributable to the fact that those over 60 cannot avail of the Voluntary Parting Scheme. The exercise demonstrates that the Complainant received a severance gratuity of €23,062, while the Comparator received a severance gratuity worth €69,528. The Court is satisfied that such disparity in severance gratuity is based exclusively on the ages of the employees.
Accordingly, the Court finds as a fact that the setting of different ages in respect of the severance gratuity constitutes prima facie evidence of discrimination on the grounds of age. It must be said that the Respondent has not to any great extent, attempted to claim that the treatment was not discriminatory, rather it has sought to justify the treatment in terms of the exceptions granted under Section 34 of the Act. Further it has stated that the Court should look at the schemes in terms of their overall effect, particularly in terms of income foregone by both the Complainant and the Comparator assuming that both reached normal retiring age and availed of all elements of the schemes open to them.
In defence of the impugned act of discrimination Counsel for the Respondent relied on Section 34 (3) of the Act, and presented financial information to substantiate its position that significantly increased costs would result if extra costs associated with the payment of additional severance gratuities to all other relevant employees, which it claimed would amount to €1,073,247. It stated that the impact of a large additional cost factor would be significant indeed, both in the context for the viability of the scheme, as a vehicle for reducing overheads in line with competitors and in light of the respondent's present financial situation.
The Legislation
The relevant parts of Section 34 of the 1998 Act to which this claim applies state:
Savings and exceptions related to the family, age or disability.
- 34 (3) Nothing in this Part or Part II shall make unlawful discrimination on the age ground or the disability ground in circumstances where it is shown that there is clear actuarial or other evidence that significantly increased costs would result if the discrimination were not permitted in those circumstances.
(4) Without prejudice to subsection (3), it shall not constitute
discrimination on the age ground to fix different ages for the retirement (whether voluntarily or compulsorily) of employees or any class or description of employees.- (7) It shall not constitute discrimination on the age ground for an employer to provide for different persons -
(a) different rates of remuneration or
different terms and conditions of employment if the difference is based on their relative seniority (or length of service) in a particular post or employment.
- (7) It shall not constitute discrimination on the age ground for an employer to provide for different persons -
The Court is of the view that the Schemes do not come within the exceptions for the following reasons: -
Section 34 (7) (b) states that schemes based on seniority or service are excluded from the provisions of the Act relating to age discrimination. The Court has found that the Schemes the subject matter of these proceedings are not schemes based on seniority or service. They are simply age based. It does not matter how much or how little seniority or service the Complainant has, once he is over sixty he can only receive six months' salary by way of gratuity. The respondents cannot therefore rely on the provisions of Section 34 (7).
The Respondents claim that payment of this claim would result in significantly increased costs and that, therefore, they can avail of the exemption contained in Section 34(3). The Court is not satisfied that "clear actuarial or other evidence" has been adduced by the Respondent to show that significantly increased costs would result if the discrimination of the Complainant were not permitted. The Company's Finance Director, who gave evidence of the Company's financial circumstances, supplied information. The information given by the actuary on behalf of the Company related to the comparison of benefits from the schemes with income forgone - for both the Complainant and the Comparator.
However uncontroverted evidence was given at the hearing that the Complainant was the only person who had made a claim of age discrimination in relation to the Schemes. Since all other complaints would now be outside the time limits set down in the Act, the only cost to the Respondent would be such sum as the Complainant might receive by way of compensation. Since the maximum the complainant could receive is €43,792.00 this sum when set against the profits of the Respondent could not be deemed to be a significant cost.
Therefore, the Court finds that the Complainant has been discriminated against on the grounds of age in breach of Section 6 and 8 of the Act.
Article 6 of Directive 2000/78/EC Establishing a General Framework for Equal Treatment in Employment and Occupation provides justification of differences of treatment on grounds of age on certain grounds. Section 6(1)(f) of the Act defines discrimination on the age ground and is thus in line with the provisions of Directive 2000/78/EC.
The relevant extracts from the Directive are:
Article 6
- Justification of differences of treatment on grounds of age
1. Notwithstanding Article 2(2), Member States may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within, the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary.
Such differences of treatment may include, among others:
(a) the setting of special conditions on access to employment and vocational training, employment and occupation, including dismissal and remuneration conditions, for young people, older workers and persons with caring responsibilities in order to promote their vocational integration or ensure their protection;(b) the fixing of minimum conditions of age, professional experience or seniority in service for access to employment or to certain advantages linked to employment;(c) the fixing of a maximum wage for recruitment which is based on the training requirements of the post in question or the need for a reasonable period of employment before retirement.2. Notwithstanding Article 2(2), Member States may provide that the fixing for occupational social security schemes of ages for admission or entitlement to retirement or invalidity benefits, including the fixing under those schemes of different ages for employees or groups or categories of employees, and the use, in the context of such schemes, of age criteria in actuarial calculations, does not constitute discrimination on the grounds of age, provided this does not result in discrimination on the grounds of sex.
- 1. Member States may introduce or maintain provisions, which are more favourable to the protection of the principle of equal treatment than those laid down in this Directive.
2. The implementation of this Directive shall under no circumstances constitute grounds for a reduction in the level of protection against discrimination already afforded by Member States in the fields covered by this Directive.
- 1. Member States may introduce or maintain provisions, which are more favourable to the protection of the principle of equal treatment than those laid down in this Directive.
It has long been a settled tenet of European Law that untransposed Directives have direct effect on all emanations of a member state in cases where the Directive is not transposed. Simply put that means that any body set up by the State or for which the State bears ultimate responsibility must, after the enactment of a Directive and before the Directive is transposed, ensure that National law is applied in compliance with the terms of the Directive, and must set aside any provision of National Law which may conflict with the Directive, seeMangold v Helm Case C144/04:
"It is the responsibility of the national court to guarantee the full effectiveness of the general principle of non-discrimination in respect of age, setting aside any provision of national law which may conflict with Community law, even where the period prescribed for transposition of that directive has not yet expired."
Coillte is undoubtedly an emanation of the State and therefore this Court would find that the provisions of any untransposed Directive must be presumed to have direct effect. However, since the findings of this Court is that the sum of€43,792.00 is not a "significant cost" and, therefore, the Respondent cannot avail of the provisions of Section 34 (3), it is not necessary for the Court to consider the effectiveness or otherwise of the Directive
The only matter remaining is to assess the level of compensation the Complainant should receive. The Court is empowered under Section 82 (1) (c) to make an order for compensation for the effects of the acts of discrimination. The Court has listened attentively to the contention by the Respondents that the main purpose of the Schemes and in particular of the increased severance payment to those under 60 was to ensure that they would have some income while they await the date when their pension became payable, whereas, the Complainant, being over 60 would receive an immediate pension. However, the fact remains that the provisions in the Schemes as constituted were discriminatory, and if the complainant had been treated in the same manner as the comparator he would have received an extra €43,792.00.
The Court, therefore, finds the Complainant was discriminated against on the grounds of his age in breach of Section 6(1) and 6(2)(f) of the Employment Equality Act, 1998. The Court, hereby orders the Respondent to pay to the Complainant the sum of €43,792.00 for the effects of the discrimination.
The Court so determines.
Signed on behalf of the Labour Court
Caroline Jenkinson
28th March, 2006______________________
CONDeputy Chairman
NOTE
Enquiries concerning this Determination should be addressed to Ciaran O'Neill, Court Secretary.
The only matter remaining is to assess the level of compensation the Complainant should receive. The Court is empowered under Section 82 (1) (c) to make an order for compensation for the effects of the acts of discrimination. The Court has listened attentively to the contention by the Respondents that the main purpose of the Schemes and in particular of the increased severance payment to those under 60 was to ensure that they would have some income while they await the date when their pension became payable, whereas, the Complainant, being over 60 would receive an immediate pension. However, the fact remains that the provisions in the Schemes as constituted were discriminatory, and if the complainant had been treated in the same manner as the comparator he would have received an extra €43,792.00.
The Court, therefore, finds the Complainant was discriminated against on the grounds of his age in breach of Section 6(1) and 6(2)(f) of the Employment Equality Act, 1998. The Court, hereby orders the Respondent to pay to the Complainant the sum of €43,792.00 for the effects of the discrimination.
The Court so determines.
Signed on behalf of the Labour Court
Caroline Jenkinson
28th March, 2006______________________
CONDeputy Chairman
NOTE
Enquiries concerning this Determination should be addressed to Ciaran O'Neill, Court Secretary.